Which Cost Of Debt Should Be Used In Forecasting Cash Flows?
AbstractABSTRACT Frequently, analysts and teachers use the capitalized rate of interest for the cost of debt when forecasting and discounting cash flows. Others estimate the interest payments when forecasting annual financial statements or cash flows based on the average of debt calculated with the beginning and ending balance. Others use the end of year convention that calculates the yearly interest multiplying the beginning balance times its contractual cost. The use of one or other methods is critical for the definition of the tax savings. These approaches are illustrated with examples and the differences in using them. A simple proposal to solve the problem is presented.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by UNIVERSIDAD ICESI in its journal ESTUDIOS GERENCIALES.
Volume (Year): (2009)
Issue (Month): ()
Contact details of provider:
Other versions of this item:
- Ignacio Velez-Pareja, 2007. "Which cost of debt should be used in forecasting cash flows?," PROYECCIONES FINANCIERAS Y VALORACION 004318, MASTER CONSULTORES.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ignacio Vélez–Pareja, & Julián Benavides-Franco, 2006.
"There exists circularity between WACC and value? Another solution,"
- Ignacio Velez-Pareja & Julian Benavides Franco, 2008. "There exists circularity between WACC and value? Another solution," PROYECCIONES FINANCIERAS Y VALORACION 004557, MASTER CONSULTORES.
- Ignacio Vélez–Pareja & Rauf Ibragimov & Joseph Tham, 2008.
"Constant Leverage And Constant Cost Of Capital: A Common Knowledge Half-Truth,"
- Ignacio Velez-Pareja & Rauf Ibragimov & Joseph Tham, 2007. "Constant leverage and constant cost of capital: a common knowledge half-truth," PROYECCIONES FINANCIERAS Y VALORACION 003939, MASTER CONSULTORES.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ximena Duenas).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.